Allstate and Citigroup Settle Mortgage Securities Lawsuit

Allstate Corp. and Citigroup Inc. have settled a lawsuit filed by the insurer in a New York state court. The bank was accused of fraudulently selling hundreds of millions of dollars of mortgage-backed securities. Allstate, the largest publicly traded U.S. home and automobile insurer, sued Citigroup in State Supreme Court in Manhattan in 2011, along with banks including Deutsche Bank AG, Bank of America Corp. and Morgan Stanley. The Northbrook, Illinois-based insurer, said in the suit that it bought more than $200 million of securities from New York-based Citigroup that were backed by residential mortgages.

Allstate and Citigroup settled the case on “mutually agreeable terms,” according to Daniel L. Brockett, a lawyer with Quinn Emanuel Urquhart & Sullivan, who represented Allstate. The court had denied motions by Morgan Stanley, Deutsche Bank and Bank of America to dismiss Allstate’s claims. In the case against Morgan Stanley, the court rejected an argument that the lender is shielded from liability because offering materials disclosed that representations about the loans were based on information from originators. The case is Allstate Insurance Co. v. Citimortgage Inc., in the New York State Supreme Court, New York County (Manhattan).